Last month, we started looking at common opportunities that we find with our new accounting services clients. We looked first at the core of successful accounting systems and financial reporting, the chart of accounts. This month, we will look at more procedural or organization best practices. Many of the recommendations we discuss below are important to formalize, as they impact individuals and departments outside of the finance office.
Filing or Keeping Track of the Paper
Have you ever wondered, where you filed a vendor contract for services? Or where you saved the Treasurer of the Board’s approval of the monthly bank reconciliation so it is ready for the auditor? A filing system, electronic or paper, is key to ensuring efficiencies within the accounting department and outside of the department as well.
Do you have programs that provide information to you, consultant contracts or grant awards? Do you have a single common location to save them so everyone has access to the latest information? Most organizations today are moving to electronic storage of documents making that single common location much easier to attain. Files should have the same terminology if you are storing items, reports, and backup documentation electronically so it is easily identifiable with the source document. A filing “map” of your electronic systems will help to ensure the system doesn’t go off the tracks. It is critical to have backup documentation accessible so that everyone understands what project is affected, who is responsible, how much is allowable, and who can authorize to sign. Don’t forget to attach your backup documentation to what you are filing so it is easy to find information at your fingertips. Remember back to the day you had those stacks of paper on your desk and you didn’t know where to file them? Make sure your electronic system doesn’t end up the same way.
Schedules, Timelines, and Checklists
Another item we have found is many nonprofit organizations do not have regularly established month-end processes with a checklist, persons responsible, and deadlines. These are important to maintain consistency with every month-end preparation and to ensure timely completion of tasks for the presentation of monthly financial reports to executive management, funders, and the Board of Directors. Here are more points to consider:
- Be sure to communicate your month-end checklist to others in your organization
- Your development department may need to provide you with donor information by a certain deadline
- You will need salary information from payroll to enter personnel costs for the month
- Are there supervisor approvals for time allocations that need to be submitted?
Our goal for each month-end close is to have the “books” audit ready. Establishing a checklist that follows the “prepared by client” (PBC) list provided by your auditor is a good first step in determining what should be completed at the end of each month. If you complete the PBC schedules regularly at month-end, you can be assured that your financial statements prepared monthly are consistent with what the auditors will prepare at the end of your fiscal year.
By implementing some of these procedural “fixes” to the lessons we’ve learned from our accounting clients, you should be on the right track. Check back next month as we talk in more detail how to best be prepared for the auditor with an article on reconciliations.
Nonprofit Accounting Consultant